Defined contributions V AVC - any difference?

D

Dave Byrne

Registered User
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Each year I try to up my pension contributions through my work D.C. scheme and if possible top up with an AVC before filing my tax return.

Are D.C. Contributions treated any differently to AVC contributions, say come retirement?

If not, is there any value in me upping the monthly contributions when I could just make one (or more) AVCs when I deem it timely, e.g. now, when the trade war is depressing markets?
 
A scheme will have a set employee contribution (could be 0%, it's up to the trustees). Any employee contribution over this amount is an AVC. It's irrelevant whether it's paid monthly or as a lump sum. Benefits are the same at retirement too.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
I thought splitting contributions into DC & AVC’s at retirement would give more options.

So, assume you are aiming for 1.5 salary lump sum. You could use all AVC towards lump sum and the up to 25% of DC pot. - remainder of DC pot has option of ARF.

If you put everything into DC pot, then if the max lump sum is limited to 25% of this, assuming you still want an ARF.

I’m not an expert, but in similar boat, so pls treat this as a question.
 
You can't take 1.5 times salary tax free lump sum and 25% from AVC's. It's one or the other.

DC contributions and AVC's are the same, it just technical jargon.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
Thanks Steven,
So in my scenario, I will have say 100k in avc, 200k in DC and an max entitlement of 150k for 1.5 times salary. (Figures simplified for example)

I think in this scenario, I could take 100k AVC and 50k DC and still not break 25% threshold to force remainder of DC into annuity. (So 150k lumpsum & 150k ARF)

If I had 300k in DC, then max lump sum I could take without forcing an annuity would be 300k x 25% = 75k. (75k lump sum & 225k ARF) or go the annuity route (150k lump sum & 150k annuity).

I’ve only started looking at all this pension stuff recently, so not sure. It’s very complex, but a little bit interesting (which is frightening!).
 
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